Why do loans take so long to get hold of?

One of the major drawbacks to applying for credit, is that the process can just take so long to complete. While credit types like payday loans can be completed and paid out often within a day, traditional personal loans, mortgages and credit card applications can take much longer. Here are some of the reasons why:

Long Term reliability check

For borrowing large loans, such as mortgages, a lender needs to check your financial credibility over the long term. Large loans are huge commitments for both the borrower and the lender. When making a decision, a lender will need to have researched deep to understand not only your financial history, but your likely financial future. They will look at the level of your income, the stability of your income, any savings or investments as well as your historic behaviour, such as missed payments or defaults on your record. 

Internal Co-ordination

It is not uncommon for traditional loans and mortgages applications to run through the hands of 20 or so professionals before a decision is made. With mortgages for example, they need to be checked by the processing team, the underwriting team and the settlement team and all this takes time. With so many people involved it is common that bottlenecks will occur from time to time and further delay the process.

Document Verification

Most personal loan providers carry out verification of personal details and employment details the old fashioned way, with paperwork and documents. You will often be asked to provide payslips, birth certificates or photographic information, proof of employment and residency or a selection of these items. The back and forth of all these documents can take time, especially when the delivery of these documents needs to be secure and precise. While this does ensure with a degree of certainty, that you are who you say you are, live where you say you live and work where you say you work, it is a lengthy and somewhat antiquated system.

These are the three main reasons that some types of loan can take a while to process. It is mainly due to the many levels of security and administration that are involved in what is at times an antiquated industry with antiquated systems. At times you will find that the greater the length and level of agreement, the greater the time taken to assess suitability.

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Related questions to this one: Why do loans fall through?

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